February 23, 2013

Reputation.com - The price of reputation

Is the market for protected personal information about to take off?

EMBARRASSING pictures on Facebook show you dancing the hula naked at a frat party. A convicted bank robber in Texas has the same name as you—as every Google search makes all too clear. Such embarrassments would surely never befall you, dear reader. But they are common enough to spawn an entire business devoted to protecting and polishing people’s image online. Reputation.com, a Silicon Valley technology firm, is hoping that this year the market will finally fulfil its potential.

Reputation has 1.6m customers. For $99 a year or more they get a basic “reputation starter” package, which monitors when they are mentioned online and alerts them if anything sensitive comes up, such as “your real age, name, address, mugshots, legal disputes or marital problems”. For $5,000 a year, the firm will “combat misleading or inaccurate links from your top search results” (most people do not look at results much below the top page or two).

The problem has been to create a profitable business. Although there has long been evidence of growing unease about online privacy, getting anyone to pay for greater control of their image has proved difficult. “A lot of companies have started with idealism about empowering the online user, only to find that the user wouldn’t pay,” says Esther Dyson, a technology investor, who nonetheless remains optimistic that this will change.

Michael Fertik, Reputation’s 34-year-old founder, thinks the change is now happening, helped along by several recent deals. In January Reputation acquired Reputation 24/7, a British competitor. It also began a partnership with Equifax, one of America’s big three consumer-credit monitoring firms, offering Equifax’s customers free access to Reputation’s basic online identity-monitoring and clean-up services. TransUnion Interactive, a competitor of Equifax, will roll out a similar arrangement with Reputation in the spring.

The next step is to launch a data vault—like a bank vault containing all the data that constitute a person’s reputation. It is the most important step in Mr Fertik’s idea not merely to give people more power over their data but to “invert the basic business model of the internet”. The current business model, as he describes it, is that giant firms give customers something free, collect data on them without their knowledge and sell it to third parties to do with whatever they like. “We want to turn it on its head, by [letting] the consumer… decide if they want to sell information about themselves to companies that want to get to know them.”

The upstart firms face some technology problems. Reputation is making progress in some areas, such as how to ensure the person whose online presence is being monitored is actually the person you think he or she is. But the biggest challenge is to find enough buyers and sellers to create a marketplace potentially worth billions. Mr Fertik reckons critical mass will come at around 10m individual customers and around 50 companies keen to pay for access to their data vaults.

Not everyone is convinced consumers will go for this. One boss at Microsoft argues that most people will find managing personal data too complex and that in practice online privacy will be secured by regulation, not products. In the past couple of years more firms have started to accept that personal data will be protected more strongly than before, whether by regulation—which is likely to be tightened in Europe and America—or through market mechanisms like those envisaged by Mr Fertik. Indeed, the data vault may usher in the sort of market-based solutions that “might discourage heavier regulation by Congress, where protecting privacy is one of the few genuinely bipartisan causes,” says Jon Leibowitz, the (outgoing) chairman of America’s Federal Trade Commission. “Reputation.com is very far ahead of the curve in trying to give consumers some control over their data,” he adds.

Reputation is not alone, though. It competes with a host of start-ups, from personal.com to mydex. Another firm, Snapchat, is tackling the problem at its source by allowing people to send photos to friends that erase themselves shortly after being viewed. Some big firms, including banks and maybe even current internet giants, will probably enter the new market. Some may even offer to buy Reputation. Mr Fertik is not fazed. His firm has the advantage of that most valuable thing, which it must protect at all costs: a good reputation.